When, a few minutes ago, I read that the Italian government has announced a temporary suspension of mortgage payments (“Mortgage Payments Suspended Across Italy Amid Coronavirus Outbreak,” March 12, 2020), I quickly pulled the Twitter trigger:
Lenders are humans too and the virus, contrary to the state, does not discriminate on the basis of balance sheet. Moreover, bankrupt states may direly need more lenders soon.
The mortgage lenders include the pleb’s pension funds, but the proletarians don’t see this. The state is not going to tell them by waging a propaganda campaign. There are more borrowers than lenders, at least consciously.
This reminded me of one of Anthony de Jasay’s deep reflections. (His work is full of such deep reflections.) Once you have understood it, and even if you end up thinking that the situation is not that bad after all, you never see the political world with the same eyes:
When the state cannot please everybody, it will choose whom it had better please.
READER COMMENTS
Andrea Mays
Mar 12 2020 at 5:26pm
Powerful. Sometimes it must please those who have weapons (the military), sometimes those on whom future electability relies.
Giving the state power to do things *for* you often morphs into giving the state power to do things *to* you.
When I first read the headline about “suspending” mortgage payments, I wondered how many other contracts can government unilaterally abrogate? Social Security? Medicare?
Pierre Lemieux
Mar 12 2020 at 6:29pm
From memory, Georges Ripert (it must be in Le Déclin du Droit) explains how, during the war, the French government started the cascade and had to compensate the individuals harmed by its previous grants of privilege and compensations.
Thomas Hutcheson
Mar 13 2020 at 8:56am
At least part of the financial crisis in 2008-9 was the failure of mortgage contracts to have state-of-the-economy clauses in them. It would have made sense for lenders to stretch out payments for unemployed home owners rather than foreclosing, especially because their cost of funds was going down with the belated and inadequate and too soon reversed QE. A mortgage holiday may work as a very crud approximation of those more intelligent contracts that did not get written.
Matthias Görgens
Mar 14 2020 at 7:57am
If it’s in lenders’ economic interest to refinance and renegotiate terms with borrowers who have trouble paying, they were and are free to do so, aren’t they?
Roger D McKinney
Mar 14 2020 at 7:43pm
The real problem was that a lot of people who could make their payments walked away because the value of their houses had dropped 50%
Roger D McKinney
Mar 14 2020 at 7:44pm
Excellent points! Good economists look at the long run effects on everyone. Pensions have been near bankruptcy for a decade. This may push them over the edge.
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